What Q3 earnings will look like for 5 pharma giants

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Another earnings seasons is ready to kick off. As usual, Johnson & Johnson will lead the procession of big pharma and biotech companies. Analysts are poised for a quarter of strong growth from the bellwether and hope its pharma peers will follow suit.

Themes that will echo throughout all the earnings calls this season are the competitive threat from biosimilars, the potential for tax reform, state regulations on drug pricing and what's in the cards for M&A.

Here's a look at what you can expect from the first week of earnings calls:

Johnson & Johnson (October 17)

The pharma giant is expected to beat consensus estimates in the third quarter — always a good sign for the industry as a whole. The pharmaceutical segment of Johnson & Johnson makes up about 50% of the company and analysts expect that the strength of this unit will carry its other less prosperous units (consumer goods and medical devices).

During the second quarter, J&J said it expected the second half to be more fruitful, driven by newer drugs. The psoriasis drug Tremfya (guselkumab) was approved in July, so look for commentary on how that launch is taking off.

Investors will also be interested in how the pulmonary arterial hypertension (PAH) drugs — Uptravi (selexipag) and Opsumit (macitentan) from the Actelion acquisition — are doing. J&J management has noted that several brands — cancer drugs Imbruvica (ibrutinib) and Darzalex (daratumumab), psoriasis drug Stelara (ustekinumab), antipsychotic Invega Sustenna (paliperidone) and heart drug Xarelto (rivaroxaban) — are expected to exceed $4 billion in peak annual sales each (not this quarter, but in coming years).

The rheumatoid arthritis market will also be of interest, especially J&J’s commentary on Remicade (infliximab), now that biosimilars have joined the fray. Despite the competition, Remicade sales are expected to continue to be strong. So far, biosimilars have failed to make a dent in the market and J&J has expressed little concern about the impact of these copycat products.

Roche (October 19)

Two recent drug launches have been dominating the news out of Roche — the PD-L1 inhibitor Tecentriq (atezolizumab) and the multiple sclerosis drug Ocrevus (ocrelizumab).

Tecentriq has been lagging behind other drugs in the PD-1/L1 class and several of its combination studies were recently put on hold by the Food and Drug Administration as part of a class-wide action. Roche will likely give an update on its strategy for making Tecentriq competitive, as well as any feedback from the FDA on the holds.

The drug also missed in a confirmatory study in bladder cancer and investors will want to know what that means for the approval in the indication.

Ocrevus, meanwhile, has been out-performing expectations, which were already extremely high. Expect Roche to tout the success of this product and give further details on how the launch is doing.

But all eyes will be turning to emicizumab, the company’s up-and-comer in hemophilia. The drug had strong data in inhibitor patients and data in non-inhibitor patients is expected by the end of the year. Following that, decisions from the FDA and EMA are expected in February of next year.

Beyond the near-term opportunity in hemophilia, Roche’s Genentech has always been known as an oncology powerhouse — and that remains true; there are currently 29 drugs in its oncology pipeline. The company is relying on its work with diagnostics to differentiate it from the pack.

Biogen (October 24)

It’s been a fairly quiet few months for Biogen. Unlike the second quarter, when the company dropped $420 million combined for clinical drugs from Bristol-Myers Squibb Co. and Remedy Pharmaceuticals Inc., Biogen has steered clear of any major deals as of late.

But the large biotech is surely still on the lookout for potential neuroscience assets. CEO Michel Vounatsos said during a July earnings call that his company believes "all signs point to neuroscience as the next oncology," and plans to double down in the areas of multiple sclerosis (MS), Alzheimer’s disease, Parkinson’s disease and spinal muscular atrophy (SMA).

On the SMA front, expect a good portion of Biogen’s third quarter earnings presentation to focus on the continued rollout of Spinraza (nusinersen). The drug raked in $203 million in sales for that period — smashing the $70 million mark analysts had forecasted — and continues to be a closely watched growth driver.
To keep the Spinraza momentum going, Biogen will want to secure insurance coverage and formulary inclusion for 2018.

The company has already had success in that light for its core MS business, securing a spot on CVS Health Corp.’s formulary for Avonex (interferon beta-1a) and Plegridy (peginterferon beta-1a). The company is looking to branch past MS, though, with Biogen planning to set aside roughly $400 million for value-creating R&D each year by 2019.

Eli Lilly & Co. (October 24)

In July, the Indianapolis drugmaker laid out a revamped strategy for how it plans to compete in oncology, signaling its intent to put more muscle behind drugs that have a chance at being best-in-class.

How effectively Lilly is able to do that will quickly be put to the test with abemaciclib, the company’s recently approved breast cancer treatment. Now known as Verzenio, the drug is the third CDK 4/6 inhibitor to reach the market behind Pfizer Inc’s Ibrance (palbociclib) and Novartis AG’s Kisqali (ribociclib).

Last month’s approval was only for second-line treatment for HR+/HER2- breast cancer patients. A filing for an OK in first-line is expected early next year and success there will be key to Lilly’s hopes to gain market share.

But, outside of breast cancer, the drug’s prospects took a hit when Lilly reported this month that Verzenio failed to improve survival in advanced lung cancer patients with KRAS mutations. Lilly intends for the drug to be a building block for its oncology business; setbacks like this could check the company’s aspirations.&nb

Diabetes, though, remains Lilly’s calling card. It has weathered pricing pressures in the U.S. diabetes market better than most and sales of newer medicines Trulicity (dulaglutide) and Jardiance (empagliflozin) have grown strongly. Investors will want to see even more, especially from Jardiance, as it closes in on J&J’s leading Invokana (canagliflozin).

Novartis (October 24)

Next week’s conference call will be the first update from Novartis management since the Swiss pharma won the first U.S. approval for a CAR-T therapy. The regulatory nod was a landmark achievement for a field which has progressed rapidly, spurring excitement about the technology’s potential to change the standard-of-care for some blood cancers.

Yet Novartis, and others who follow it, still have a long road to travel to prove CAR-T’s commercial viability. Kymriah (tisagenlecleucel) costs $475,000 a year — a price tag that has simultaneously sparked serious worries about affordability while surprising investors expecting an even higher number.

Novartis has said it will try to address concerns by collaborating with the U.S. government to allow for payment only if patients respond to treatment after one month.

Scaling up manufacturing while safely shepherding the individualized treatments across the country will be further challenges Novartis must meet.

While CAR-T grabs the headlines, investors will also be watching for continued growth from key new drugs like the IL-17 inhibitor Cosentyx (secukinumab) and the heart drug Entresto (sacubitril/valsartan). Higher revenues from newer entrants such as these will be needed to offset rapid erosion of sales from Gleevec (imatinib), now generic.

This quarter’s earnings will also be the first since Vas Narasimhan, the company’s R&D head, was tapped as the successor to CEO Joe Jimenez. The change won’t take place until the end of January next year, but Narasimhan’s commentary will now carry more weight.